How?
There is a solution. As Meagan Day
points out, the Higher Education Act in 1965 gives the secretary of education the power to write off federally owned student debt
unilaterally, under the “compromise and settlement” provision. Doing so would wipe out an enormous financial burden on the working and middle classes overnight. The Department of Education could also purchase the roughly
$64 billion in privately held student debt, then use the same authority to write it off.
One objection to this idea will be to ask if the government really can afford to forego $1.5 trillion or more in funds that writing off the debt would involve. In short, it can.
$1.5 trillion is the
total amount that debtors owe the government, and only a small fraction of that is collected each year. But the federal government takes in $1.6 trillion
every year just from personal income taxes. In fact, in
2017, the government had an annual revenue of roughly $3.3 trillion, 92 percent of which derived from income and payroll taxes. The remaining 8 percent includes all other forms of revenue, not just revenue from student loans.
Whatever part of the $1.5 trillion balance the government actually collects in a given year thus represents a trivial part of the federal budget. In terms of maintaining the current budget, it could simply be ignored. Otherwise, it could easily be balanced by cutting
mismanaged defense spending, or just vetoing the
$1.7 trillion the Pentagon wants to develop a new generation of nuclear missiles. Other options include lifting the income cap on payroll taxes or imposing a
financial transaction tax — all policies that would benefit the government coffers anyway. And that’s before we even get to more politically difficult yet necessary proposals like raising the historically low top marginal tax rate.
But the funding question can come after the debt has been canceled. To date, the compromise and settlement provision has been executed very narrowly, but there are virtually no legal or regulatory restrictions on how widely it may be applied. This leads to the strategic advantage of making cancellation of student debt an early priority for a Sanders administration: most of Sanders’s proposals require new legislation, but even a Democratic-controlled Congress is unlikely to back Sanders’s legislation as proposed without significant
pressure from below.
From eliminating cash bail to tuition-free college to Medicare for All to an increased minimum wage, some moderate and conservative Democrats will join Republicans in opposing pro-working-class legislation altogether. Others will try to undermine it from within, perhaps conceding the ideas are good in theory while insisting that they be applied in a narrow, bureaucratic, means-tested manner rather than in a
solidaristic, class-wide way.
Because it requires no legislation, eliminating student debt would be an important early win for a Sanders administration likely to face harsh opposition from both parties in Congress. But beyond giving the impression of pro-Sanders momentum in the press, writing off student debt has the potential to galvanize millions of working people.
People who thought they couldn’t afford to have children would have an enormous obligation off their backs — thanks to President Sanders. People whose loan-scarred credit scores kept them from buying a home, or who couldn’t even think of saving for a down payment until they’d paid off their loans would be unshackled — thanks to President Sanders. People would be released from soul-crushing jobs and free to pursue more fulfilling but less lucrative occupations — thanks to President Sanders. People who have nothing saved for retirement could put the money they resentfully pay Navient into a nest egg — thanks to President Sanders. $1.5 trillion would go into stimulating the economy rather than back to a government that doesn’t need it via for-profit loan servicers that shouldn’t exist — thanks to President Sanders.
class-struggle social democracy” means in practice. He would show that these ideas are not abstract and far away, but practical, material, and immensely beneficial. And he would win the loyalty of millions of Americans by freeing them from an enormous financial burden — many of whom would be newly ready to join the fight as he geared up for the big legislative battles to follow.
How would those millions feel when they got a first taste of financial freedom, presented to them with the rhetoric of class solidarity — when they saw that Sanders’s government was truly looking out for people like them? What would Sanders be able to do with those millions ready to fight alongside him?